The Unidroit Principles of International Commercial Contracts: An Innovative Approach to the Law Governing International Contacts

The Unidroit Principles of International Commercial Contracts are a non-legislative codification or “restatement” of the general part of the law of international commercial contracts. They have been prepared by a group of independent experts from all the major legal systems and geo-political areas of the world, set up by the International Institute for the Unification of Private Law (Unidroit), an intergovernmental organisation composed of 61 member States (www.unidroit.org).

First published in 1994, in their present edition of 2004 the Unidroit Principles consist of a Preamble and 185 articles divided into 10 chapters on  general provisions, formation including authority of agents, validity, interpretation, content including third party rights, performance including hardship, non-performance and remedies, set-off, assignment of rights, transfer of obligations and assignment of contracts, and limitation periods. Each article is accompanied by comments and, where appropriate, by factual illustrations intended to explain the reasons for the black letter rule and the different ways in which it may operate in practice.

The Unidroit Principles represent a mixture of both tradition and innovation. In other words, while as a rule preference was given to solutions generally accepted at international level (“common core” approach), exceptionally solutions best suited to the special needs of international trade were preferred even though they represented a minority view at domestic law level (“better rule” approach).   

Defined as “a significant step towards the globalisation of legal thinking” (J.M. Perillo), the Unidroit Principles may – and actually do – serve a number of important purposes in practice.

They have been taken by a number of national legislatures as a source of inspiration for the reform of their domestic contract laws.       

Moreover, also in view of the fact that they are available in virtually all the principal languages of the world, the Unidroit Principles are more and more frequently used by parties in negotiating and drafting cross border contracts.

Finally, and most importantly, arbitral tribunals increasingly refer in their decisions to the Unidroit Principles.  In a number of decisions they have been applied as the rules of law governing the substance of the dispute, either because expressly so requested by the parties or because the contract referred to “general principles of law”, “lex mercatoria” or the like, and the arbitrators considered the Unidroit Principles a particularly authoritative expression of such supra-national or transnational principles and rules of law. In other decisions the Unidroit Principles have been used to interpret international uniform law instruments, in particular CISG. In still other decisions they have been invoked in support of a particular solution adopted under the applicable domestic law or in order to fill gaps in the latter. 

At its 40th Plenary Session in 2007, the United Nations Commission on International Trade Law (UNCITRAL) formally endorsed the UNIDROIT International Commercial Principles and commended their use by the international business community.

For a collection of decisions (166 as of September 2006) and bibliographical references relating to the Unidroit Principles see the UNILEX database see www.unilex.info.

CISG

See www.unilex.info with the text as well as international jurisdiction on the United Nations Vienna Convention on the International Sale of Goods (CISG).

See also www.cisg.law.pace.edu.

Option A of the Model Choice of law clause proposes the classical choice of a national law.

Sometimes the parties have difficulties to agree on one specific national law as no party wants to (or succeeds to) impose its own law or because the costs of research of a neutral law are perceived as too expensive. For such cases Options B and C indicate a possible way out.

Option B is a clause for international sales contracts or for mixed contracts with an element of sale. It essentailly refers to the internationally accepted CISG for which, by now, there is international case law which is easily accessible via internet. Please note that the option B in the choice of law clause refers to the CISG "without regard to any national reservation". That excludes the application of national reservations made by the countries where the parties come from. For example that excludes the (outdated) reservation made by the People's Republic of China under Article 96 CISG with respect to the form of a contract (requiring written form and which is thereby more rigid than the new Chinese contract law itself). As the CISG does not cover all issues, Option B provides that it is supplemented for those issues which it does not cover by the Unidroit Principles of International Commercial Contracts (link to comments).

Option C provides for a choice of the parties to refer to the Unidroit Principles of International Commercial Contracts (link to comments) for which, by now, there is access to 166 decisions from arbitration tribunals or courts from around the globe via internet. Thus, there is no special research needed by research teams in other jurisdictions in order to determine the contents of such neutral rules. For a description of the Unidroit Principles of International Commercial Contracts click here (link to comments).